Here's why Snapdeal is betting big on services

The e-commerce company is planning to grow this segment significantly this year by forging partnerships with third-party playersTaslima Khan | ET Bureau | July 08, 2016, 08:53 IST

Rohit BansalSnapdeal is expanding the list of services offered on its platform, as the online marketplace works on new revenue streams at a time when growth in product sales is slowing across the country’s e-commerce industry.

The company, which sees a million service-led transactions a month now on this vertical that it began piloting in March this year, is planning to grow this segment significantly this year by forging partnerships with third-party players. Services is estimated to be a $100-billion industry in India by 2020 and to tap the opportunity, Snapdeal is aggressively ramping up its technology.

“We are expanding the scope of Snapdeal from selling products to enabling consumers to buy many more things and build a marketplace for services as well. We aim at providing a seamless experience to consumers so they would not need to log into different apps to avail of different services,” co-founder Rohit Bansal told ET in an interview. “We have always strongly believed and stated that over the next five years, 10% of India’s consumption can move online and with the same vision we moving towards the goal of achieving 20 million daily transacting users by 2020.”

Snapdeal, which is aiming to build much higher user engagement with services, had been over the last few months piloting integration of services on its platform in partnerships with companies like Zomato, Urban-Clap, redBus and Cleartrip. These services — flight and bus ticket bookings, hotel reservations and food ordering — are now fully live on the Snapdeal app. Earlier this year, the company introduced recharges and bill payments on its platform.

The move from Snapdeal comes at a time when Snapdeal and Flipkart are under threat from Amazon, which is fast increasing market share. As reported by ET in April, Amazon dislodged Snapdeal to become the second-largest online marketplace by shipments, becoming the only major player to increase its share of shipments in the market from a year ago.

While Flipkart’s share of shipments fell to 37% in March from 43% in the same month in 2015 and Snapdeal's fell to 14-15% from 19%, Amazon India’s unit market share surged to an estimated 21-24% from 14%.

“The move to diversify is coming from the desperation to generate more and more revenues since in terms of GMV and other value terms seems to have stalled substantially,” said Arvind Singhal, chairman at retail consultancy Technopak. Adding services on the platform, though makes for astrong business case, may not necessarily work out feasibly for these players since different services businesses such as fin-tech or food ordering need entirely different approaches and expertise. “Although there are global precedents of e-tailers making more money from their core merchandise-led sales, say Amazon making more money from its cloud services than physical goods sales, Alibaba having built a very successful payments business with Alipay and its logistics business, Indian e-tailers are extremely challenged at present since their core business are yet not stable enough for further diversification,” Singhal said.

Bansal said it is too early to say how big a revenue contributor services will be to Snapdeal but labelled its efforts on the space as “investments for the future.” “It’s not been tried in India. We are unravelling a lot of things for the first time. We are extremely gung-ho about it and the early traction is very solid but it is too early to project what this number will become,” he said. For Snapdeal, over the last three quarters, the biggest area of investment has been in building up its back-end technology platform to integrate the offerings of multiple service providers on a single app.